2016: The year of “Low Cost Long Haul” at Gatwick

2016 was the year that the concept of “Low Cost Long Haul” gained significant traction in the UK.

Norwegian consolidated its position at London Gatwick and is due to add frequencies to existing long-haul routes in 2017. WestJet had a difficult start to its long-haul operations at Gatwick with a lot of adverse publicity in the Canadian media following delays, diversions and cancellations. However, undeterred, WestJet looks set to press ahead with more long-haul growth in 2017.

Whilst Gatwick airport missed out on an additional runway, Gatwick will no doubt be pleased that Cathay Pacific’s flight from London Gatwick to Hong Kong is to go daily from 1 June 2017. The airport will no doubt use this to encourage more airlines to co-locate at Gatwick and Heathrow.

2017: The year BA and IAG fight back against Norwegian

The development of Low Cost Long Haul has not gone unnoticed by International Airlines Group (IAG) and its subsidiary airlines.

Whilst Norwegian has yet to show that its strategy can translate into long term profitability, it has clearly captured the imagination of passengers. Witness the huge amount of positive PR it generated with its promise of flights from Edinburgh to New York from £56 each way (Air Passenger Duty alone makes this fare simply uneconomic).

IAG has in the past exercised scepticism as to whether the concept of low cost long-haul can work. However, it has spent the past year examining Norwegian’s business model and finances. And now we are beginning to see the results of this work.

BA also plans to “densify” some its Boeing 777 aicraft by moving from 9 to 10 seats across in World Traveller economy. BA claims this will give it a lower cost per seat than a Norwegian Boeing 787. We would not be surprised to see more measures by BA to compete against Norwegian including “unbundling” its World Traveller economy service to offer lower headline fares.

IAG is also reported to be considering launching its own low cost long haul airline in Barcelona in 2017.

2017: New routes from London Heathrow to Santiago, New Orleans and Portland

Qantas gained huge PR from the promise of non-stop flights from London Heathrow to Perth in 2018 which are due to go on sale in April 2017. Much less was said about its existing daily services to Sydney and Melbourne via Dubai, with speculation that Dubai-Melbourne could be cut.

Virgin Atlantic is in the process of refurbishing its highly regarded London Heathrow Clubhouse. BA is to also open a dedicated “First Wing” at London Heathrow Terminal 5 from April 2017 (something that should have arguably been in place since the terminal opened in 2008).

After years of steadily degrading its in-flight product in EuroTraveller economy with inconsistencies between both Gatwick and Heathrow and different routes, BA finally bit the bullet and announced Buy On Board catering from 11 January 2017. It will be interesting to see whether other network carriers in Europe follow suit.

On a more positive note, BA will introduce its Club Europe business class service to UK domestic routes from 2017. The exact start date is yet to be announced.

BA is to also roll out WiFi across most of its short-haul and long-haul fleet. The first long-haul aircraft to be fitted with high speed WiFi will be a Boeing 747 in February 2017. The first short-haul aircraft to be fitted will be an Airbus A321 from the summer of 2017. Aer Lingus, Iberia and Vueling will also be installing the same system across most of their aircraft.

2017: BA’s promise of a £400m investment in Club World long-haul business class

United Airlines unveiled its new “Polaris” business class which will replace its Global Business and GlobalFirst cabins. Though, there is no date as to when this come to London Heathrow.

The flat bed revolution in long haul business class was of course started by British Airways.

It has doggedly stuck with its “yin-yang” 2-4-2 seating configuration in its long-haul business class Club World product. BA has promised a £400m investment in Club World with improvements to food & beverage and a redesign of its in flight service. A new seat is in development but the airline has not yet made any announcements as to when this will launch and whether it will be retrofitted to existing long-haul aircraft or whether it will be fitted to newly delivered aircraft only.

And finally…

At a corporate level, the once seemingly exponential growth of the Middle East “Big Three” (Emirates, Etihad and Qatar Airways) seems to be at least moderating.

Emirates announced a sharp fall in profits in its latest half year results and has deferred the delivery of Airbus A380 aircraft. (Bloomberg) Etihad has announced a series of redundancies at its Head Office (Bloomberg).

At Etihad its “equity alliance” strategy of acquiring minority stakes in airlines (principally in Europe – including Air Berlin and Alitalia) has come under scrutiny towards the end of this year.

Etihad owns a 29% stake in Air Berlin which is in the throws of a complex restructuring which so far has included entering into an agreement to “wet lease” aircraft and crews to Lufthansa which will operate under Lufthansa’s own “Eurowings” brand. It seems possible that, by the end of 2017, Air Berlin will be subsumed into the Lufthansa group. This will give Lufthansa (which also took full ownership of Brussels Airlines in 2016) a substantial dominant position in Central Europe.

There is also the question of the future of Alitalia which seems to lurch from one refinancing to another. Shortly before Christmas it announced a new business plan. However, it’s future ownership remains uncertain.